- Yen, Swissie & Yuan fall as trade deal doubts grow
- Chile’s central bank intervenes to prop up Peso
- Chinese industrial production grows slower than expected
- Japan’s economy grows in 3rd quarter
Doubts over whether the United States and China will be able to reach a preliminary trade deal helped to lift safe-haven currencies such as the Yen and the Swiss Franc on Thursday, while pulling the Yuan lower. Adding to pressure, Chinese retail sales, industrial output and investment data were weaker than expected, sending the Australian Dollar, already knocked by soft local employment data, to a one-month low.
US-China trade negotiations have 'hit a snag' over farm purchases, with Beijing not wanting a deal that looks one-sided in favour of the United States, the Wall Street Journal reported on Wednesday, citing people familiar with the matter. The report came after President Donald Trump said a trade deal with China was "close," but offered no details and warned that he would raise tariffs "substantially" on Chinese goods if there was no deal.
Chile’s central bank will offer $4 billion of currency swaps after the Peso weakened 6% in three days amid a wave of social unrest and investor concern about a new constitution. The currency fell to a record low against the US Dollar this week, triggering a verbal intervention from the central bank on Tuesday. At the same time, the implied volatility in the Peso spiked to the highest levels since 2006. The measures announced today will come into effect Thursday and continue until January 9, the bank said in an e-mailed statement. “I wouldn’t take this as something that will turn the market around,” said Alejandro Cuadrado, a currency strategist at BBVA SA in New York. “It will accommodate any liquidity squeeze, but it’s not fighting the depreciation. I don’t think it’s a game-changer.”
Oil prices rose on Thursday after industry data showed a surprise drop in US crude inventories while comments from an OPEC official about lower-than-expected US shale production growth in 2020 also provided some support for oil. However, prices were capped by mixed signs for oil demand in China, the world's biggest crude importer, as industrial output increased in October at a less-than-expected rate, but oil refinery throughput last month rose 9.2% from a year earlier to the second-highest ever. Brent futures (LCOc1) rose 16 cents, or 0.3%, to $62.53 per barrel by 02:50 GMT while US West Texas Intermediate Crude (CLc1) gained 22 cents, or 0.4%, to reach $57.34.
For a second day in a row, there is less-than-comforting news about a US-China trade deal and Gold is soaring once again from a push higher by those long the yellow metal and awaiting such sombre news. Gold futures for December delivery on New York’s COMEX settled up $9.60, or 0.7%, at $1,463.30 per ounce.
Asian stocks fell on Thursday after soft Chinese economic data showed the trade war between Beijing and Washington hitting growth in the world's second-largest economy. MSCI's broadest index of Asia-Pacific shares outside Japan, which had drifted into positive territory in morning trade, turned negative to trade 0.4% lower. Japan's Nikkei stock index dropped 0.6%, while Shanghai blue chips turned from positive to flat and Australia's S&P/ASX200 index wiped some of its gains to trade less than 0.5% higher by mid-afternoon in Sydney.
China’s industrial production grew slower than expected in October, while retail sales and fixed asset investment growth also declined. Data from the statistics bureau showed that industrial output grew 4.7% in October, down from 5.8% in September and the expected 5.4%. Retail sales grew by 7.2% in October from a year ago, compared with expectations of 7.8%. This was the lowest monthly growth rate since April. Fixed asset investment grew by 5.2% in the first ten months of the year, compared to expectations of no change at 5.4%.
US Senator Elizabeth Warren questioned Goldman Sachs's response to allegations of bias in how the bank evaluates applicants for Apple Inc's credit card, suggesting it should pull down the algorithm if it cannot be explained, Bloomberg reported on Wednesday. A criticism of Apple Card's algorithm started last week, after entrepreneur David Heinemeier Hansson railed against the evaluation process in a series of Twitter posts, saying it gave him 20 times the credit limit that his wife received.
Australia’s unemployment rate increased, and the economy shed jobs for the first time in 17 months, a surprise result adding to evidence that central bank interest-rate cuts are failing to gain much traction. The jobless rate advanced to 5.3% in October from 5.2%, data from the statistics bureau showed Thursday; economists had expected it to hold at 5.2%. Highlighting the labor market slack, the under-utilization rate, which combines unemployment and under-employment, rose 0.3 point to 13.8%.
Japan’s economy slowed sharply in the third quarter as overall exports continued to fall amid trade tensions and a shopping splurge before a sales tax increase ran down stockpiles of goods. The deceleration comes as Prime Minister Shinzo Abe mulls the size of an economic stimulus package aimed at shielding Japan’s economy from the global slowdown and the impact of the tax hike. Abe may also need to consider the implications of Tokyo’s trade spat with Seoul, as a steep decline in Korean tourist numbers dragged on the economy.
US consumer prices rebounded more than expected in October and underlying inflation picked up, which together with abating trade tensions and fears of a recession, support the Federal Reserve's signal for no further interest rate cuts in the near term. The Labor Department said on Wednesday its consumer price index increased 0.4% last month as households paid more for energy products, healthcare, food and a range of other goods. That was the largest gain in the CPI since March and followed an unchanged reading in September. In the 12 months through October, the CPI increased 1.8% after climbing 1.7% in September.
Australia’s bonds have fallen far enough in recent weeks to price in positive US-China trade news and may now be poised to rally as global and domestic economic growth slows, UBS Group AG says. Benchmark 10-year yields may drop to a record 0.5% next year as the US and China fail to resolve their trade dispute and existing tariffs stay in place, according to Giulia Specchia, Australia and New Zealand rates strategist at UBS in Sydney. While there are signs global manufacturing is stabilizing, there is no indication purchasing managers indexes are bouncing back, she said.
New Zealand’s central bank could cut interest rates as soon as February if signs of an expected economic pickup fail to materialize, Deputy Governor Geoff Bascand said. “We actually think the economy is somewhere near a turning point,” Bascand said in an interview in Wellington on Thursday. “We’ve put a lot of stimulus in. We’ve got a bit longer to see how it’s transmitting. There’s time to see how that plays out and make a call in February if needed.”